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Wednesday, January 01, 2014

10 Economic Highlights to look out for in Nigeria in 2014

'Smart aid': Nigerian pupils work on computers at LEA primary school in Abuja. The school is a pilot site for the 'one laptop per child' project, which aims to provide children a means to express their potential. Photograph: Afolabi Sotunde/Corbis Source: TheGuardian.com

The fact that Pope Francis particularly prayed for Nigeria during his Urbi et Orbi, or "to the city and to the world," message from the central balcony of St. Peter's Basilica at the Vatican on Wednesday, December 25 draws global attention yet again to a country seen by many as a creeping giant. Insecurity has not only crippled the local economy, foreign investors are also sceptical on what direction the country is going. In 2013, the country witnessed the death of many civilians as incessant shedding of blood and killing at an unprecedented rate continues. In a quick response to what seem like a terror shock; security (Armed Forces, Police, National Security Adviser's office, and the para-military services) will be receiving the largest share of the country’s budget in 2014 just as it did in 2012 and 2013. This is in line with what is obtainable in advance countries where protection of persons and property receive dominant share of the government expenditure. Together with the National Conference scheduled for early 2014, it is expected that budget spendings will help foster peace and security thereby creating enabling environment for the economy to thrive. While the attention given to insecurity is a right step in a right direction, there are a few other thought lines for year 2014. Ranging from the drive for an “inclusive” budget (in meeting job creation targets and grassroots’ needs) and deepening technology to iRokotv $21 million funding and the spillover revolution of Nollywood, here are my top 10 outlook for Nigeria and indeed Africa in 2014:

1. Awareness of Mobile Payments will increase in 2014: Mobile payment options like MTN Mobile Money, Paga, and U-MO are expected to grow in 2014. The need to bank the unbanked and other reasons for the expected growth is explained in the key finding of the EFInA Access to Financial Services in Nigeria 2012 Survey. MTN’s wide spread coverage, Etisalat’s fast internet service, Airtel’s affordability and Glo’s venture in the mobile banking are factors that will ultimately lead to growth in mobile payments in Nigeria in 2014. Already, payD is used in the South African market where, using their mobile phone, customers are able to securely make online payments using their debit, credit or cheque card. In Zimbabwe, EcoCash, Telecash and OneWallet are taking the lead in Mobile Money. There has also been increasing popularity of Mobile Money in Uganda with the country’s 12 million mobile money subscibers reaching a transaction of $640m between January to November 2013.

2. e-Commerce will take centre stage: This is very related to the above point on Mobile payment and transactions. On 16th December 2013 German e-commerce incubator and cloning giant Rocket Internet, MTN, Africa’s largest cellphone operator and Stockholm-listed Millicom International Cellular partnered to develop internet e-commerce businesses in Africa through Africa Internet Holding (AIH), a vehicle to develop e-commerce businesses across the African continent (alongside partner Millicom International Cellular). They each took a 33.3% stake but the value was undisclosed. While still subject to regulatory approval, the parties expect the transaction to close during the second quarter of 2014. The implication for Nigeria? More transaction will be fulfilled online and there will be a radical change from the traditional brick and mortar shopping to shopping online as seen in developed countries. Businesses will have to respond by developing B2C and B2B enterprise architecture that will facilitate e-commerce. AIH has already developed a number of e-commerce ventures in the last 18 months, including Jumia, Zando, Kaymu, Jovago, Lamudi, Carmudi, EasyTaxi and Hellofood. The partnership is expected to capture the growth potential of the digital media space across footprints in the region.

3. The year of Financial and Overall inclusion in Nigeria: With a huge rural population that is economically challenged, financial and labour market inclusion is indispensable for the sustainable growth of Nigeria and when government at top level have identified this fact, we see it as a right step in the right direction. Inclusiveness is an explicit strategy for poverty eradication and accelerated growth and it’s highly welcomed in Nigeria. It is expected that the N4.642 trillion ($29 billion) 2014 budget (available here), if properly implemented, will strengthen the rural base, agricultural sector, allowing for better equality in income distribution in the economy. To quote the Nigerian Minister of Finance, "It's a budget for jobs and inclusive growth…The budget supports policies that will continue to push agriculture, manufacturing, investment so that our youths can have modern jobs." Also if the SURE-P funds are well utilized as proposed, hopefully, the economically marginalized will be reached through job creation and in creating safety nets for women and children. Oil is more of a curse than a blessing for Nigeria as the video below shows and hopefully all of these will ultimately lead to an economy that will gradually (because it will not happen suddenly) move towards economic diversification away from oil. At the same time, it is expected that the existing banking infrastructure in Nigeria will be upgraded in 2014 to meet growing demands. The average number of clients per Bank branch is 3882, compare to 3922 in Kenya and 8595 in Tanzania. Central Bank of Nigeria microfinance banking policy (2005) and the CBN financial inclusion strategy (2012) are all worthwhile interventions put in place by the government to encourage financial inclusion.

It is true that the Nigerian automotive policy seem like a move that “puts the cart before the horse”, it should however be a celebrated initiative because of the enormous positive social externalities it can bring. Such initiatives allow the manufacturing sector to find its bearing as local contents are sourced for car parts (raw materials from the agricultural sector), the engineering academia (who have many internationally recognized professors) will play their practical roles in economic development, jobs are created and international automobile innovation hubs can be established in the country. Hopefully Peugeot Automobile of Nigeria (PAN) and others will trace their way back to Nigeria as the power reforms and other government reforms work to address problems that led to failure similar policy moves in the ‘70s, ‘80s and ‘90s. Let’s leave this point here for now even though there’s temptation to stretch the inclusivity theory to cover the purported housing sector reforms under the Nigeria Mortgage Refinance Company (NMRC), the agricultural transformation program and other recent economic push. It will be interesting to see how the economy unravels in the year 2014 and certainly there will be many events to watch out for.

4. International Development assistant (or ODA) is not expected to increase but remittance will:

Life was sweet when the leaders of the world's most powerful western economies pledged themselves to debt relief and aid to help poor countries in July 2005 when Britain hosted the G8 summit at Gleneagles. Growth was strong, asset prices were rising, and the financial crisis was two years away. Fast-forward to 2013, one thing was obvious when Britain chaired a similar G8 meeting at Lough Erne last summer: there will be no repeat of the commitment to double aid within five years. Money is tight. Most donour countries in the OECD are on their fiscal cliffs with characteristic high energy prices and compounded by their struggle to ensure financial solvency.

Since remittance exceeded foreign direct investment (FDI) and other development assistance (ODA) for the first time in 2012, remittance trend is seen to continue to play significant role in developing economies. In 2009, Nigeria received over $10 billion in remittances from citizens living in the diaspora and was ranked first among the top 10 remittance recipients in 2010 in Sub-Saharan Africa with average share of remittance to GDP of 10.4% between 2005-2011 (African Economic Outlook 2013; World Bank, 2011). The World Bank (2012) reported that the top recipients of officially recorded remittances for 2012 are India ($70 billion), China ($66 billion), the Philippines and Mexico ($24 billion each), and Nigeria ($21 billion). Although remittance has been identified to eradicate poverty among the recipient households (Chukwuone et al, 2012), little is known about its effects on job creation and employment especially for the young people. Remittance has its own unique way of addressing the challenges such as corruption that ODA and FDI face both in donour countries and recipient nations. Remittance is specific in use and carries efficient group/channel effects. It is expected that 2014 will be the year when social, fiscal and labour-market policy recommendations will be made to help in channelling the large amount of remittance in Nigeria for sustainable growth. This will fall in line with increasing international debate on how to reduce cost of remittance as well as help developing countries cope with falling ODAs.

5. Political pressure will heat up towards 2015 general elections and ethnic and religious bigotry will increase:

It’s not reasonable to observe the spate of open letters flying about in Nigeria in 2013 and think such attitude will fall in 2014. In fact, open letters and associated political forces will continue to generate heat as the country draws closer to the 2015 general election. Apart from the five governors of the ruling PDP defecting to the opposition APC on Nov. 26 2013, on Dec. 18, the ruling party lost 37 parliamentary seats to the same opposition party. This is a collection of events some analyst call “things fall apart”. Nigeria’s political history and elections since democracy has generally been characterized with violence and it will take a miracle for such to quiet down going by the situation of things in 2013. The ruling party and the president will continue to face challenges and the greatest-ever will be in 2014. It is not only in Nigeria, similar issues are expected across Africa and we will recollect that even South African’s President Jacob Zuma was booed and jeered by South Africans during Mandel’s burial ceremony – a worrying sign for his African National Congress (ANC) as it heads for polls in about six months. Many Nigerians and also friendly foreigners agree that the country is facing various problems on political stability. Analysts see the major problem as that of national unity in an atmosphere of the rising profile of ethnicity and religious bigotry. The ongoing deadly ethnic-religious clashes in some parts of Nigeria and renewed militancy and oil theft in the southern Niger delta (put at between 100,000 (Chatham House) to 250,000 (Nuhu Ribadu Report) barrels of oil a day) continue to amplify the political divide thereby giving room for more heat in the polity. 2014 will not only be a critical year for INEC (who is expected to receive buoyant support in the 2014 budget), political parties are expected to hold their national conventions to choose their parties presidential candidates in preparation for the 2015 elections. We should be interested and look forward to how the commission will respond to emerging electioneering issues in 2014 with Ekiti and Osun governorship elections serving as a litmus test for the 2015 election. Not to forget to add that 2014 also marks 100years since the country's Northern and Southern protectorate was merged into one Nigeria in 1914 (i.e. the centenary). This will call for renewed global attention on Nigeria to see how the political climate is changing or challenging the history and aspiration of the people.

6. Information technology (ICT) use will grow as Social media (Facebook, Twitter, etc) expands with expansion in use of mobile devices and smartphone all of which will enforce better governance: As Samsung gains leadership in the indian market, it is well positioned to become African leader. In 2014 the battle between Apple and Samsung (mobile device leaders) will have impact in the African market as Apple will strive to expand its market niche in the growing African economy. A Positive impact should of course be expected for Africa as this will not only bring in new products, prices should fall too. Africa is seen as a growing market when it comes to internet usage. According to the World Bank Africa Development Indicator 2012-13 report, of the 89-million recorded internet users in sub-Saharan Africa, half were in Nigeria. While only around 15.6% of Africans are online, infopreneuers, journalists, bloggers and the likes will take on social media in 2014 to utilize various platforms in sharing information and shining the light on injustices. A recent survey of 1000 university student found that 90% of them use Facebook. Twitter and other social media will witness higher use in Nigeria moving forward.

There are also a growing number of social entrepreneurs in Africa, who are utilizing their training and education to develop businesses and initiatives that tackle social challenges. Innovation hubs, incubators and accelerators are supporting entrepreneurs across the continent and are gradually attracting investors and corporate partners. Spaces supporting tech entrepreneurs, such as the Co-Creation Hub in Nigeria and iHub in Kenya, are creating jobs and improving the livelihoods of the poor. iCow, an application that provides timely agricultural information to dairy farmers in Kenya via SMS has reached almost 12,000 farmers and increased their income through elevated milk yields and decreased disease outbreaks.

Efiko, an application that enables students in Nigeria to test their knowledge of the school curriculum and compete with friends, has been played by thousands of senior secondary school students. Although most of these initiatives are at times criticized for being elitist, the applications springing up from them will definitely play impactful roles as we enter into 2014.

7. Higher use of technology will lead to better governance in 2014: since Barack Obama signed the Memorandum on Transparency and Open Government on his first day in office, eventually led to Data.gov, African countries have also made efforts to have similar open data portal and Kenya in particular is playing leading role in this regard with the www.opendata.go.ke. The Nigerian National Bureau of Statistics (NBS) is making similar effort with the www.nigerianstat.gov.ng. The story of governance in Africa though punctuated by war, coups de etat and not-so-democratic elections is also full of stories of democratic progress and innovation. Technology is playing a role on the demand side of governance with citizens taking to technology platforms to amplify their opinions and demand better services from governments. It’s playing a big role on the supply side as well with governments adopting e-government and making progress along the path to open government and turning Africa into an attractive place to live in and do business. Notable example include the Kenya Revenue Authority’s (KRA) Portal, Tanzania Revenue Authority e-Filing and mPayments, Rwanda Mobile-enabled Driving license applications and Liberia’s Online Company Registry. This economic and urban boom in cities like Lagos and Accra where existing public infrastructure systems -- from transportation, to water, sanitation, energy, healthcare, public safety, education and administration – is under increasing strain, technology could play a variety of roles to address these issues. Other areas to watch out for include electronic lands registries, integrated financial management systems and electronic business registration in an effort to improve service delivery in their government to government (G2G) interactions and G2C / G2B services. Of course the idea of cloud computing, big data and mobile technology will be interconnected areas of discourse in 2014.

iROKOtv, the Africa-based movie platform for Nigerian movies (known colloquially as ‘Nollywood’) has closed a funding round of $8 million, led by existing investor Tiger Global, with further participation from Sweden-based Kinnevik. A new investor to this round is US-based Rise Capital. This brings the total raised to $21 million, which makes iROKOtv one of the best well-funded internet companies in Africa today. iROKOtv a Video-on-Demand (VOD) platform for African content which claims one million monthly users. The new capital will be used to flip the company’s audience from a primarily Diaspora base to an African base, as well as migrating from a largely ad-supported model to subscription service. Obviously, the aim here is to become the Netflix for Africa. Currently, 50% of iROKOtv’s audience is located in the UK and US. It’s important to mention that Nollywood will continue to grow in 2014 as both content quality and market penetration improves. A long-run market equilibrium analysis of what makes Nollywood different from Hollywood; giving it a comparative/competitive advantage is shown below. Some of these include large small, medium sized enterprise with low factor input and cost leading to high output (when compared to western countries) yet sufficient to break-even. Nollywood’s popularity has spread throughout English-speaking Africa and has even gained traction in the African Diaspora of North America, Europe and the Caribbean (Olley, 2009). Increasing government support for Nollywood and industrial stimulus resulting from affordable digital filming and editing technology provide opportunity for real life “family-oriented-than-American-films” story lines of love, violence and HIV/AIDS that depicts the typical African struggle for livelihood amidst difficult economic condition brings the African Story to the world. Genres also usually include religion, the occult and rags-to-riches tales. It is expected that the industry will continue to build on this model and witness continued growth in 2014. Oh, can I talk about the booming Nigerian music industry?!

9. CNN will be making concerted effort at capturing more African market/audience and that should attract other TV service providers:

CNN International is proposing to launch a new TV show titled African Start-Up, which will join the existing African Voices, CNN Marketplace Africa and Inside Africa programs is a bid for the globally acclaimed news company to cement its long standing commitment to Africa. The new series, airing as a weekly segment and then bi-Monthly as a half hour special, follows several small and medium-sized Enterprise and Entrepreneurs in various African countries to see how they're working to make their dreams become reality. One of African Start-Up production is ‘Nigeria iTunes’ which explores how ideas are generated, business plans formulated, capital raised and distribution model for products defined. The entrepreneurs take viewers through their daily challenges, charting both the setbacks and the opportunities that exist for those with the vision and creativity to try something new. The weekly segment is set to air in January 2014. Just as the entry of Starbucks (world leading coffee company) is an indication of economic growth in a country or community it venture into, the expected implication of the CNN move is that more TV service providers will be looking forward to the African market which seems booming at the moment.

10. The African telecommunication sector will grow and quality is expected to improve in Nigeria:

Part of research conducted by Informa Telecoms & Media, entitled: Africa Telecoms Outlook 2014: Maximising digital service opportunities, identifies mobile broadband and the increase in global connectivity as key drivers behind this projected growth. According to statistics revealed in the research, there were 778 million mobile subscriptions in Africa by end June 2013 and the expectation is that the mobile-subscription count will reach one billion during 2015. Contrary to what is being experienced in other regions, in Africa mobile voice revenues are expected to grow over the next few years. The research adds that annual mobile data revenues on the continent are expected to rise from US$8.53 billion in 2012 to US$23.16 billion in 2018. Data accounted for 14.3% of mobile service revenues in Africa in 2012 but will account for 26.8% in 2018. “The growth in data revenues in Africa is being driven by factors including: the continent’s new submarine and terrestrial cables; the rollout of mobile broadband networks; the increasing affordability of data devices; and economic growth. As well as facilitating a rise in data connectivity in Africa, these factors are creating a platform for a range of new digital services on the continent, such as mobile financial services, e-commerce and digital content and services for the business market,” states an excerpt from the study. In an article on BizTech Africa, Nigeria govt talks tough over service quality, Minister of Communications Technology, disclosed at media parley with senior journalists, said the Ministry of Communication Technology, the Consumer Protection of Nigeria (CPN) and the regulator, the Nigerian Communications Commission (NCC) are collaborating to sanction or prosecute erring telecoms operators that have been delivering poor quality service to Nigerians. The Minister said “the Federal Government will no longer condone poor service delivery to subscribers and reiterated that henceforth, it’s no longer shall be business as usual, and operators must rise up to redress the current poor state of quality service delivery.” Another related development is the reduction in the cost of
Right of Ways (RoW) in certain states in the country which will facilitate the roll-out of telecoms infrastructure in the
country. Association of Licensed Telecoms Operators of Nigeria (ALTON)
identified that this reduction would definitely impact on telecoms service
delivery.It will be interesting to keep tab on events as they unfold
in 2014.

Conclusion: Although there are numerous challenges facing Nigeria, there are equally huge opportunities to tap into to accelerate growth and development in the country. It is obvious that the greatest opportunity is in the technology industry being the next frontier. IBM is seen to be leading the way followed by Microsoft, Google, Baidu (China’s response to google) and their affiliate partners (Orange, Hauwei, etc) as they explore investments opportunities in Africa. Like many African countries, Nigeria’s demographic prospects are promising, too. As America, Europe and China age, Africa can expect a bulge of workers in their productive prime. Though skills are in short supply, they are becoming more abundant. According to the McKinsey Global Institute, in 2002 only 32% of Africans had secondary or tertiary education, but by 2020, 48% will have. The continent can call on degree-laden expatriates such as Uyi Stewart, the Nigerian chief scientist of IBM’s Nairobi lab. The ability of government, businesses, financial service providers and the Nigerian people in general to positively respond to rising issues and convert challenges to opportunities will go a long way in shaping the Nigerian economy in 2014. Maintaining peace and security is extremely crucial to reap these benefits as this will create a climate friendly for international partnership, investment and sustainable economic growth. As Adam Smith, David Ricardo, and Heckscher-Ohlin identified in their economic postulations, every country should explore in competitive advantage to foster economic growth. Nigeria is blessed with natural resources, competitive distribution system (cutting across Africa and the world in road, airways and seaways network), a cheap workforce (fueled by abundant labour supply), a cultural revolution (with an expanding middle class) and a youth bulginess condition that continue to stimulate domestic demand. 2014 truly holds a lot and it can spell both dividends or doom depending on how we respond to opportunities and challenges as a people.

The list is certainly not exhausted. What are your thoughts about the Nigerian Economy in 2014? You can drop your comment below or continue the discussion with me on twitter Tweet to @seunoyeniran

About Me

Since winning the 2010 "Going Global" competition with my essay: "Responsible Leadership for a Complex World: Importance for Students, Employers and the International Community" (published online here: http://www2.hull.ac.uk/hubs/news-events/news/responsibleessaycompetition.aspx), I was deservedly awarded a masters degree with distinction in Economics and Business from Hull University Business School, UK. I enjoy discussions surrounding sustainable economic development: nationalization versus privatization/regulation, resource use optimization and economic diversification, education, youths, technology, agriculture and other interconnected economic issues. I use this blog to share my thoughts, views and opinions on how I feel our emerging African societies should be vis-a-vis what they are. I inadvertently express myself as a local boy from a Nigerian village who knows the power of God, culture, organic solidarity and diversity. And yes, I believe many great things can happen in our lifetime!